Globus Medical Inc - A (NYSE:GMED): A Prime Example of Affordable Growth with Strong Fundamentals

Growth investing typically focuses on companies with significant revenue and earnings increases, though prices may sometimes reach unrealistic heights. The "Affordable Growth" method seeks to strike a balance by selecting stocks with solid growth indicators and fair prices—an idea referred to as Growth at a Reasonable Price (GARP). This method screens for firms with a ChartMill Growth Rating higher than 7, stable profitability and financial strength (scores above 5), and a Valuation Rating above 5 to prevent overpaying for future prospects.

Globus Medical Inc - A (NYSE:GMED) aligns with this model, as seen in its fundamental analysis report. The firm, which creates musculoskeletal medical devices, displays a strong combination of growth and value, along with solid operational performance.

Growth: A Major Factor

GMED’s Growth Rating of 7/10 highlights its steady expansion:

• Revenue Growth: In the last year, revenue jumped 60.62%, well above many competitors in the Health Care Equipment & Supplies sector. The 5-year average annual growth is 26.25%, showing lasting demand for its spinal and orthopedic products.
• Earnings Momentum: EPS increased 21.59% year-over-year, with a 5-year annual growth rate of 13.19%. Analysts forecast a 12.10% yearly EPS rise ahead, pointing to stability despite wider economic challenges.
• Industry Comparison: GMED’s growth figures stand out against rivals, with revenue growth rates placing it among the top in its field.

For GARP investors, this growth is key—it indicates scalability without depending only on uncertain future results.

Valuation: Fair for the Growth Provided

Despite its growth path, GMED isn’t overpriced:

• P/E and Forward P/E: At 18.70, its P/E ratio is lower than the S&P 500 average (26.93) and more affordable than 80.75% of industry peers. The Forward P/E of 16.07 further implies the market hasn’t overestimated future performance.
• Cash Flow and EBITDA Multiples: GMED’s Price/Free Cash Flow and EV/EBITDA ratios are more attractive than 91.98% and 89.30% of competitors, respectively, confirming its reasonable pricing.
• PEG Ratio Note: The higher PEG ratio (which includes growth) suggests near-term earnings growth may not fully support the P/E. Still, this is partly balanced by GMED’s strong profitability, which often justifies a higher multiple.

This equilibrium between growth and price is central to the Affordable Growth strategy—it reduces downside risk while allowing for upside potential.

Profitability and Financial Strength: The Base

GMED’s Profitability (7/10) and Health (7/10) Ratings offer stability:

• Margins: A 17.79% Operating Margin beats 88.77% of peers, though recent margin declines should be watched.
• Returns: ROIC (8.24%) and ROE (4.54%) lead the industry, showing efficient use of capital.
• Balance Sheet: With no debt, a Quick Ratio of 2.72, and an Altman-Z score of 9.32 (suggesting minimal bankruptcy risk), GMED’s financial standing is solid.

These measures are crucial for GARP investors—they confirm growth isn’t driven by heavy borrowing or unstable practices.

Conclusion

Globus Medical represents the goals of the Affordable Growth screen: notable growth, fair pricing, and reliable fundamentals. Its medical device specialization provides defensive traits, while its growth and valuation metrics fit a disciplined GARP strategy.

For investors looking for similar options, discover more stocks meeting the Affordable Growth criteria through the predefined screen.

Disclaimer: This analysis is not investment advice. Perform your own research or consult a financial advisor before making decisions.